Malaysian palm oil futures fell over 1 percent on Tuesday evening to trade around three-year lows, tracking weakness in crude oil and on existing concerns over high palm stocks. The benchmark palm oil contract for January delivery on the Bursa Malaysia Derivatives Exchange was down 1.3 percent at 2,007 ringgit ($478.77) a tonne at the end of the trading day for a sixth consecutive day of losses.
It earlier fell to an intraday low of 2,006 ringgit, its lowest levels since Sept. 2015. Trading volumes stood at 38,577 lots of 25 tonnes each at the close of trade. "Crude oil fell more this evening," said a Kuala Lumpur-based trader, in explaining the declines in palm prices.
Oil prices fell around 1 percent on Tuesday after US President Donald Trump put pressure on OPEC not to cut supply to prop up the market. Palm oil prices are influenced by movements in crude oil, as the edible oil is used as feedstock to make biodiesel.
Another palm oil trader said the market was also down as overall stockpiles are still high, but added that an expected flat rate of production growth in November could support the market from sharp declines. Official data from the Malaysian Palm Oil Board on Monday showed end-October stockpiles grew 7.6 percent to 2.72 million tonnes, while production rose 6 percent to 1.96 million tonnes.
Meanwhile, exports fell 3 percent to 1.57 million tonnes from September. Shipments are also not expected to pick up in the coming months, say traders. Palm oil imports by India, the world's top consumer of edible oils, are unlikely to climb over November to January even as prices for the commodity plumb their lowest in three years, reined in by ample local supply of rival oilseeds and as a liquidity crunch hits would-be buyers.
In other related edible oils, the Chicago December soybean oil contract was down 0.3 percent, while the January soybean oil contract on the Dalian Commodity Exchange rose 0.1 percent. The January palm oil contract also gained 0.1 percent. Palm oil prices are affected by movements of other edible oils as they compete for a share in the global vegetable oil market.
Palm oil is expected to test a support at 2,016 ringgit per tonne, a break below which could cause a loss to 1,996 ringgit, according to Reuters market analyst for commodities and energy technicals Wang Tao.
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